Weekly Roundup 10: A Curated Linkfest For The Smartest People On The Web
Here are some links to articles that didn’t make our front page. Several of the articles are very insightful I highly recommend reading them. As always, the articles are from different fields but should make you a more well rounded investor. Take Care.
(Click on the titles to access the articles)
1. The Bernard Madoff Case: Trust Takes Another Blow– Via Knowledge Wharton – These are tough times for trust. Successful marketplaces — indeed, all social systems — require a level of ethical behavior among their participants. The recent arrest of Bernard L. Madoff, accused of bilking thousands of investors in a $50 billion Ponzi scheme, is only the latest incident to diminish trust on Wall Street. Wharton operations and information management professor Maurice E. Schweitzer and G. Richard Shell, professor of legal studies and business ethics, have conducted extensive research on the role of trust in markets. In an interview with Knowledge@Wharton, they explain why even the most sophisticated investors put their faith in Madoff and how his actions have damaged markets in general.
2. Video: The Economics Of Sex Trafficking – Via Fora.Tv – A Luncheon Address by the Honorable Mark Lagon, U.S. Department of State.
3. Video: Garrett Lisi On His Theory Of Everything – Via Ted Talks – Physicist and surfer Garrett Lisi presents a controversial new model of the universe that — just maybe — answers all the big questions. If nothing else, it’s the most beautiful 8-dimensional model of elementary particles and forces you’ve ever seen.
4. More On Taxing Speculation – Via Conglomerate Blog – The news has been filled with stories of meltdowns in the financial world, with the government, independent agencies, and politicians all devoting significant time and energy to coping with the consequences. As investment banks, hedge funds, and mortgage lenders continue to suffer massive losses, the government and its agents are left to try to pick up the pieces. Among other options being discussed, the government has proposed buying up illiquid assets of such investors, in effect betting on the price of illiquid mortgage securities. But what if, in addition to these more transparent problems, additional hidden costs from the financial crisis were being borne by the government in some other way? Even worse, what if the government had implicitly underwritten some of them in the first place? Building on insights from recent finance literature, this article contends that the government could in fact bear such hidden costs, through the interaction of a unique and underappreciated aspect of publicly traded financial derivatives – the ability to “decouple” the economic return of a risky asset from direct ownership of the underlying asset itself – and an income tax on risky investments.
5. Blunder: Why Smart People Make Bad Decisions – Via Mind Your Decisions – It was at Stanford that I truly understood that smart people blunder just like everyone else. To be honest, the realization came as something of a surprise during my freshman year. I was stunned how people much smarter than me were making bad decisions. There was the person that set off the fire alarms the night before finals by overcooking popcorn. And then there was this guy that injured himself from excessive celebration after a ping pong game (he’s never going to live that one down). But perhaps the ultimate story was this woman who ordered one of those “as seen on TV” ab machines-the kind that uses electric stimulation to build muscle passively. She failed to follow directions, and within the first week of use, she burned her stomach.
6. Causes And Effects Of Fuel Hedging – Via Nonsense – China Eastern Airlines, one of the country’s largest carriers, said it faces a “significant loss” for 2008 after fuel price hedges turned bad to the tune of 6.2 billion yuan ($906 million) (from Associated Press).
7. Brad Delon On Milton Friedman’s Wayward Disciples – Via Brad DeLong, when he sets his mind to it, is one of the clearest writers in economics today, persuasive in rhetoric and in fact. In this paper he argues that many members of the Chicago school have departed from Milton Friedman’s views in an important way. While Friedman and Keynes differed on technical issues, they agreed that “it was the business of the government to boost asset prices via open market operations and bank rescues” when “the money stock and the flow of aggregate demand started down.” The contemporary Chicago school has twisted this view, he says, to argue that government interference with the market is never a good thing.
8. The Happiness Myth – Via Rationally Speaking – After having greatly enjoyed Doubt: A History, by Jennifer Michael Hecht, I’m now reading her The Happiness Myth: The Historical Antidote to What Isn’t Working Today. The first book is a must-read for anyone seriously interested in skepticism across time and cultures, including the many — usually under appreciated — religious skeptics. Hecht’s second volume should also be on the shelf of anyone seriously interested in happiness, and who on earth isn’t?
9. Dermans Financial Manifesto – Via Socializing Finance – Here is a fascinating reaction to the credit crisis. As you know, we at Socializing Finance have been following the work of Emanuel Derman very closely, and count ourselves as admirers of his book. The credit crisis threatens to completely destroy the legitimacy of quantitative finance.
10. Audio: Crisis & Capitalism Does History Suggest Where We’re Headed – Via Council On Foreign Relations – Very Interesting Speakers Robert Shiller, Okun, Bordo,